September 07, 2022 | Supply Chain Strategy
Rising inflation is hitting enterprises hard. It is increasing costs and impacting the bottom lines on corporate balance sheets across industries and sectors.
To counter it, the U.S. Federal Reserve, Bank of Canada and Bank of England have all raised interest rates significantly, and the European Central Bank just raised rates for the first time in more than 10 years.
With uncertainty remaining about the outlook for inflation, central banks must walk a fine line of aggressively raising rates without slowing the world economy into a recession.
Regardless of any faltering in the global economy, keeping supply chains going should be a top priority for global companies.
And although supply chain disruptions have eased slightly, the Federal Reserve’s Global Supply Chain Pressure Index is still at a historically high level, meaning it’ll take more time for lead times and supply shortages to get back to baseline.
What should businesses be doing to mitigate risks and ensure their supply chains can continue operating efficiently, even in a potential recession?
Three strategies they should consider include:
Achieving better visibility into supply chain partners across the value chain is important in developing the resilience to respond to risks with agility. And it’s critical in creating an efficient supply chain. In a recent GEP-commissioned study by Economist Impact, two in three executives rated enhancing supply chain visibility as a high priority to mitigate disruptions in 2022.
For example, apparel company Carhartt is reportedly seeking to improve its end-to-end supply chain visibility , incorporating supply chain data from its logistics providers into its systems. By investing in supply chain technology , the company hopes to improve its exception management and respond to disruptions more proactively.
Also Read: The Cost-Plus World of Supply Chains
Higher inflation has driven up uncertainty around product and material availability. In such an environment, there is a greater need for enterprises to enhance collaboration between procurement and supply chain, as well as between companies and trading partners, to support more efficient sourcing, capacity planning and demand forecasting.
Instituting best practices and technologies that enable real-time data sharing and tighter communication with multiple tiers of suppliers, partners and logistics providers are an advantage in the current disruptive climate, but even more so in the event of a potential downturn.
Also Read: The Supply Chain Convergence Playbook
Leveraging artificial intelligence capabilities in modern supply chain software allows companies to make supply chain planning and sourcing more cost efficient through real-time analytics and insights to help drive efficiency and productivity through its supply chain.
Making supply chain planning more accurate with advanced AI allows enterprises to be more responsive to shifts in demand and reduce the impact of long lead times and shipping delays that can threaten profits in a recessionary period.